Solving the E&S market’s two greatest challenges

In surplus lines, there are two key areas in need of NAPSLO's attention.

By Hank Haldeman|February 20, 2015 at 05:24 AM

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As a young professional, I was drawn to a career in surplus lines insurance because of the ability for individuals and companies to innovate, along with the flexibility and the continuing diversity of the work. Through my years in the industry much has changed, but those same things that initially attracted me to this segment of the insurance industry remain unchanged and just as critical to success.

As we prepare for NAPSLO’s 2015 Mid-Year Leadership Forum, which begins Monday at the Fontainebleau Miami Beach, I think this industry is in a great position to capitalize on those attributes both in how we attract new talent to our firms and in how we approach an ever-evolving marketplace.

According to the 2014 Special Report U.S. Surplus Lines–Segment Review, published by A.M. Best with a grant from the Derek Hughes/NAPSLO Educational Foundation, surplus lines direct premium written grew 11.8% and 8.4% in 2012 and 2013, respectively, which was a reversal of a five-year decline we saw from 2007 through 2011. The report also noted that over the 21 years that this report has studied the market, the surplus lines portion of the market has more than doubled from 3.3% of total property/casualty direct premiums written in 1993, to approximately 6.9% by the end of 2013.

Domestic professional surplus lines insurers generated average growth of near 20% per year in direct written premium over that time. Surplus lines has also grown as a percentage of commercial lines direct written premium from 6.1% to 13.7%. Perhaps of greatest significance, for the 10th year in a row, the surplus lines industry reported no financially impaired companies.

The Surplus Lines Stamping Office of Texas also recently reported that the 14 states with stamping offices saw continued growth in surplus lines premium during 2014, up 7.6% from 2013. According to that report, total surplus lines premium reported to the Stamping Offices was nearly $24.2 billion in 2014, representing a 7.6% increase over 2013. Approximately 3.4 million filings were made with the Stamping Offices in 2014, up 6.9% from 2013. History shows us that reports from the Stamping Offices continue to be fairly representative of the total U.S. surplus lines market.

While we know that all trends may at some point be subject to reversal, this is positive news for our industry and points to the ongoing strength of the market. To help sustain this growth and continue to evolve, which is key to our survival, it has perhaps never been more important for us to think about bringing new, young talent into our fold, and how to retain and train our human capital to be prepared for the next 40 years. We must also tell the story of our industry effectively, to educate the retail community about the innovation and expertise that the wholesale distribution system brings to a transaction, highlighting the ways in which surplus lines professionals add value for the end consumer. NAPSLO is helping members execute on both of those tasks.

NAPSLO’s career awareness and education initiatives are valuable tools to help feed the pipeline of good people who want to learn, innovate and create for our firms. NAPSLO begins that process with outreach to college students. During 2014 NAPSLO touched more than 2,200 students during symposiums and college visits and provided those young people with compelling information about what a career in surplus lines looks like and how rewarding it can be.

As a follow-up to creating awareness, the Derek Hughes/NAPSLO Educational Foundation provides 14 to 15 scholarships of $5,000 each annually to students who are studying insurance and hope to go on to join us as colleagues. NAPSLO also provides an internship program that placed 14 interns with 28 NAPSLO member firms for summer positions last year. These internships have proven to be valuable for the students as well as the wholesale brokers and companies who host them. Students are exposed to a variety of roles within the industry and gain hands-on experience while their hosts are able to recruit highly talented future employees.

NAPSLO’s education opportunities are also robust and provide a full slate of schools and training programs to help us develop new and existing talent. These exemplary schools are suited for professionals in any phase of their E&S career, providing lifelong career development.

NAPSLO also remains committed to the wholesale distribution system and to spreading the message of its value to retailers. The Association leverages that message on behalf of the industry in a variety of ways, always emphasizing the expertise, innovation, capacity and custom solutions that NAPSLO members bring to a transaction. We are professional problem solvers, and NAPSLO helps us tell that story, which ultimately benefits the end consumer who is able to cost-effectively purchase cost-effective and tailored insurance solutions to fit their needs.

During the Leadership Session in NAPSLO’s 2015 Mid-Year Leadership Forum we have an opportunity to learn from Kim Lear, an expert in the nuances of multigenerational workforces, about how to effectively manage the workforce. As we network, we also have the opportunity to create further opportunity for our industry and the important work we do to solve complex risks for insurance consumers.

I am confident in our industry’s future, invigorated by its continued growth. I am pleased to represent members of NAPSLO as president, and am honored to be part of our collective efforts to sustain our great industry.